AT&T's profits dip despite iPhone boom

AT&T Inc. on Thursday said its third-quarter profit fell 1.2 percent as strong wireless growth and a record number of iPhone activations failed to offset losses in the company's deteriorating residential phone business.

AT&T Inc. on Thursday said its third-quarter profit fell 1.2 percent as strong wireless growth and a record number of iPhone activations failed to offset losses in the company's deteriorating residential phone business.

The Dallas-based telecommunications giant reported earnings of $3.19 billion, or 54 cents per share, compared with $3.32 billion, or 55 cents per share, for the same period last year. Revenue also dipped slightly to $30.9 billion in the quarter, compared with $31.3 billion a year ago.

That still was good enough to match analyst estimates on revenue, and the 54 cents per share beat Wall Street projections of 50 cents per share.

The nation's largest phone company continues to post strong numbers in the wireless segment.

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Total wireless revenue rose by 8.2 percent to $13.6 billion.

AT&T said it added 2 million wireless customers in the quarter, its best-ever third quarter for net wireless subscriber adds.

The company now has a total of 81.6 million wireless subscribers, second to Verizon Wireless, and says it has added more than 6.7 million wireless customers in the past year.

"We had just a terrific wireless quarter," AT&T Chief Financial Officer Rick Lindner said in a conference call with analysts.

AT&T also said it added 4.3 million cell phones that help generate wireless data revenue to its network, with iPhones accounting for nearly 75 percent of that total. In all, AT&T says it activated a record 3.2 million iPhones in the quarter, of which nearly 1.3 million were new customers.

But the company's legacy wireline business continues to lose customers and money. Wireline revenue fell 7.1 percent to $16.3 billion, while profit in the segment dropped by 30 percent as AT&T disconnected 1.54 million phone lines in the third quarter.

That trend is expected to continue as competition from cable companies for residential phone line customers increases and more folks switch to cell phones.

To help offset losses in its wireline segment, AT&T is focusing its energy in a new direction: emerging devices such as netbooks, electronic readers and personal navigation systems that will use the company's wireless network. AT&T currently tests such devices for compatibility at its lab in Austin.

Ralph de la Vega, president and CEO of AT&T Mobility, said the emerging device segment "represents the next wave of wireless growth."

"We are well positioned for success in every emerging device category," he said.

During the quarter, the company also gained 240,000 subscribers to U-verse, its cablelike TV service, bringing the total number of customers to 1.8 million. AT&T has added more than 1 million U-verse customers since last year. The service is expected to generate $2 billion in revenue this year.